Investment - Articles - Record number burning money in accounts paying zero interest

Alistair McQueen, Head of Savings & Retirement at Aviva comments on the Bank of England Money & Credit report for March 2022,

 “Record numbers of savers are burning money in bank accounts paying zero interest. According to today’s Bank of England data, a record £263bn is sitting in bank accounts paying no interest at all. This is despite cost of living pressures, and the average interest on new fixed-term accounts more than doubling this year, from 0.36% in December 2021 to 0.92% in March 2022. By shopping around, savers should be able to secure a fixed-term return of more than 2%.

 “The figures also indicate the era of investing in cash ISAs may be passing. After a decade of increases, March 2022 reports the first year-on-year drop in cash ISA deposits (from £294bn to £288bn)1. Cash ISAs have always been the most popular of the ISA products. But the recent age of low interest rates and the introduction of the personal savings allowance in 2016 has dented their popularity.

 “Basic rate taxpayers can now earn up to £1,000 of interest on cash deposits each year before having to pay any tax on these earnings. For higher rate taxpayers, the allowance is £500. Most now pay no tax on their cash savings, thereby removing the attraction of cash ISAs.

 “As inflation rises it is critical to make all our savings work as hard as possible. Shopping around is more important than ever.” 

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